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Brazil’s “Operation Car Wash”:Conducting Investigations in a NewBrazil
December 7, 2016
Kelly KramerPartner
+1 202 263 3007
Bernardo WeaverPartner
+55 11 2504 4604
Speakers
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Kelly KramerPartner
Washington DC+ 1 202 263 3007
Bernardo WeaverPartner
São Paulo (T&C)+55 11 2504 4604
Structure of the Presentation
1. Operation Car Wash: Overview
2. The Odebrecht/Braskem Settlement Negotiations
3. The Ongoing Legal and Political Fall Out
4. Beyond Car Wash: Other Brazilian Enforcement Operations
5. Multijurisdictional Enforcement: The New Normal
6. Implications for Compliance Programs
7. Implications for Internal Investigations
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Operation Car Wash
• Corruption scheme centered on Petrobras
– Brazilian construction companies
– Other Petrobras counter-parties
– Politicians at state and federal levels
Long-running investigation• Long-running investigation
– Federal prosecutors aggressively leveraged new prosecutorialtools
– Plea bargaining led to fundamental shift in enforcement culture
• Dramatic, ongoing impact on Brazilian politics, economyand legal system
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Odebrecht / Braskem
• Odebrecht’s leniency agreement has not been disclosed yet;
• Odebrecht released a statement as per the terms of the leniency agreement:
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Odebrecht / Braskem
• Braskem filed a notice of material fact reporting:
– “it is in an advanced stage of negotiation with the competentauthorities in Brazil and in the United States and expects toexecute, with these authorities, a resolution comprising thefacts that involved the Company in connection with theOperation Car Wash.”
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• Reported values range from US$ 1.8-2.5 billion
– Divided between Brazil, US and Switzerland
• No debarment from public bidding
• 70 plea agreements with executives
• Depositions reportedly started
Legal and Political Fall Out
• Removal of the Speaker of the Senate
– Refusal to comply
– Clashes between Executive, Legislative and Judiciary branches
• Car Wash Taskforce threat to resign
• Freezing of political reforms
• 10 measures v. Abuse of power
• Is Car Wash the new (Brazilian) normal?
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Beyond Car Wash
Operation “Zelotes”
• Corruption of members of the Administrative Council of TaxAppeals – CARF to obtain favorable decisions in tax matters
• Corruption of Congressmen and clerks to approve andinfluence the approval of Provisional Measures and obtaininfluence the approval of Provisional Measures and obtainfurther legal advantage
• Negligent contracts with consultancy companies that turnedout to be involved in corrupt practices to benefit their clients
• Criminal judicial and investigative proceedings against Brazilianand multinational companies allegedly involved in the scheme
• Several companies and financial institutions implicated
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Beyond Car Wash
• Operation “Acrônimo”: Corruption to obtain funding from theBrazilian National Development Bank (BNDES) and other taxand commercial benefits implicating the former Minister ofDevelopment, Industry and Foreign Trade and currentGovernor of Minas Gerais
• Operation “Boca Livre”: Embezzlement of otherwise due• Operation “Boca Livre”: Embezzlement of otherwise duetaxes through fraudulent use of the Cultural EncouragementLaw
• Operation “Greenfield”: Embezzlement of pension funds’investments in private companies and businesses
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Beyond Car Wash
State Level:
• Operation “Calicute”: Criminal organization led by formerGovernor of Rio de Janeiro to collect bribes from constructioncompanies in exchange for public contracts
• Operation “Alba Branca”: Corruption to obtain overpriced• Operation “Alba Branca”: Corruption to obtain overpricedcontracts for the provision of school meals to the Secretary ofEducation of São Paulo
• Operation “Caixa de Pandora”: Alleged corruption in publiccontracts between the Federal District Government andcomputer companies
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Beyond Car Wash
• Renan Calheiros, President of theSenate: Ordered to stand down aspresident of the Senate by theSupreme Court following theacceptance of a criminal complaintunrelated to Car Wash
• Michel Temer, President of Brazil:Facing yet another political crisis dueto claims that he requested that aformer Minister attended a personalrequest made by another Minister
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Corruption in Brazil: Multijurisdictional Enforcement
• Examples:
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Corruption in Brazil: Multijurisdictional Enforcement
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Corruption in Brazil: Multijurisdictional Enforcement
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Enforcement in Brazil: The Future
• On corruption issues, Brazil is now a high-enforcement jurisdiction
– Expanded law enforcement resources (e.g., Andrade Gutierrez leniency agreement)
– New expectation of corporate cooperation
– Business need to implement corporate compliance policies
– Greatly increased chance of detection– Greatly increased chance of detection
• But there are still some issues to be solved:
– Limited case law
– Turf wars between agencies charged with corporate “criminal” enforcement
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What is expected from companies in a highenforcement scenario?
• Governance
• Ethical behavior
• Cooperation
• Monitoring
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• Adequate records
• Integrity of information and data
• Transparency
• Consolidation of internal rules and policies
What is expected from companies in a highenforcement scenario?
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Compliance Programs in Brazil
• Risk assessment
• Organizational leadership and culture
• Standards and controls
• Training and education• Training and education
• Monitoring, auditing and evaluating programs
• Oversight and remediation
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Managing Internal Investigations in Brazil
• Willingness to conduct independent investigations
• Need to preserve and maintain records and documents
• Risks to the attorney-client privilege
• Obstacles to confidentiality
• Commitment to following facts, even to difficult conclusions• Commitment to following facts, even to difficult conclusions
OBJECTIVE:Understand the facts to ensure that corporate decision-makers are fully informed
when deciding whether to cooperate or to defend potential charges
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Cooperation in Brazil
• Domestic regulators
– Overlapping regulators
– Plea Bargains and Leniency Agreements
Foreign regulators• Foreign regulators
– DOJ/SEC
– Office of the Attorney General of Switzerland
– U.K. Serious Fraud Office
– Dutch Public Prosecution Service
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Thank You
For questions, please reach out to:
• Kelly Kramer, Partner+1 202 263 [email protected]
• Bernardo Weaver, Partner+55 11 2504 4604+55 11 2504 [email protected]
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